April 10, 2012
PSBCA Nos. 6347 and 6368
APPEARANCE FOR APPELLANT
APPEARANCE FOR RESPONDENT
Eugenia A. Izmaylova, Esq.
OPINION OF THE BOARD
Appellant, Sharon Roedel, seeks compensation resulting from the termination of her emergency mail transportation and delivery contract by Respondent, United States Postal Service. Appellant asserts that a contract orally agreed upon by the parties did not provide the Postal Service with a termination right. Respondent maintains that it terminated the contract on notice and without liability as allowed by the contract once the emergency situation on which the contract was based had ended. The Board conducted a hearing in Scranton, Pennsylvania. Both entitlement and quantum are at issue. We rule in Appellant’s favor but not in the amount she seeks.
FINDINGS OF FACT
1. A mail transportation and delivery contractor operating out of the Greeley, Pennsylvania Post Office did not appear for work on May 14, 2010, because he had been hospitalized (Hearing Transcript (Tr.) 38). The contractor had not designated a substitute driver, and Respondent considered him to be in default of his contract (Tr. 79).
2. On the morning of May 14, the Greeley Postmaster notified Ms. Alston, Respondent’s transportation contract specialist, by telephone about the contractor’s inability to perform and the consequent need for emergency replacement service. The postmaster also identified potential emergency suppliers. Ms. Alston immediately began the process of soliciting emergency replacement service by telephone. (Tr. 31, 38-40).
3. Appellant submitted an offer by telephone on May 14 in an annualized amount of $48,000. Ms. Alston asked Appellant to submit a revised offer, telling Ms. Roedel that her offer was too high. In response, later that day, Ms. Roedel lowered her offer to $41,000 (Tr. 10, 63; Appeal File Tab (AF) 5 at 64-65).
4. Ms. Roedel and Ms. Alston engaged in a series of telephone conversations throughout the day on Friday, May 14, negotiating the terms of a contract. Ms. Roedel was not provided contract documents to examine during the May 14 telephone discussions, and she lacked prior postal contracting experience. (Tr. 10, 12-13, 19, 40, 44).
5. Following these telephone conversations, Ms. Roedel was awarded the contract, which she understood would last for the full six-month term described by Ms. Alston even if the prior contractor were able to return. Ms. Roedel specifically asked Ms. Alston whether the contract would last for the full six months, and was told that it would. A 24-hour no-cost termination right was not mentioned during the May 14 telephone discussions. Ms. Roedel agreed to perform the six-month contract for her $41,000 annualized revised offer. (Tr. 10, 13-14, 19, 21; contra Tr. 37, 41-42, 58-59, 62).
6. Ms. Alston filled out a pre-award questionnaire based on a telephone discussion with Ms. Roedel. The pre-award questionnaire listed all matters covered in the discussion, and it did not mention discussion of a termination right (AF 5 at 45-47; Tr. 51). In addition, a box was checked adjacent to the following statement:
You will be expected to operate this contract for its full term. It is illegal to sell or otherwise transfer the contract to another. Should you become unable to fulfill your obligations under the contract, you must bring it to the attention of the Contracting Officer immediately. Generally, the only provision for release is for medical reasons.
(AF 5 at 47). At the end of the pre-award questionnaire, Ms. Alston typed, “The above discussion was held on May 14, 2010 at 4:30 p.m. by telephone.” (id.)
7. Pursuant to specific authority conferred by Respondent’s contracting officer, Ms. Ledbetter, Ms. Alston awarded the contract orally to Appellant on May 14 (Tr. 11, 44, 56, 77, 82, 87). Ms. Roedel, Ms. Alston and Ms. Ledbetter all believed that a contract had been orally agreed upon by telephone on May 14 (Tr. 19, 44, 57, 87; see also AF 5 at 77 (May 14, 2010 email sent at 7:01 P.M. from Ms. Alston to Ms. Ledbetter stating that the emergency contract “has been awarded” to Appellant)). Because performance of an emergency postal transportation and delivery contract must begin immediately, a written contract commonly is not signed until after performance of the oral contract on which it is based has begun (Tr. 37, 75).
8. Based on the oral agreement of May 14, Ms. Roedel began performing the mail transportation and delivery service early the next morning – Saturday, May 15 (Tr. 11, 27-28).
9. Ms. Roedel had been employed for the previous ten years by the same employer. Ms. Roedel resigned from that job on Monday, May 17 - the first business day after she agreed to perform the mail transportation and delivery contract. (Tr. 12-13, 15, 22-23; AF 5 at 50). Ms. Roedel neither would have agreed to the mail transportation and delivery contract nor resigned from her employment if she had believed that the contract could be terminated before expiration of its six-month term. Respondent was aware prior to award that Ms. Roedel intended to leave her pre-existing employment to perform the postal contract (Tr. 12-13; AF 5 at 50).
10. Ms. Alston prepared a written contract utilizing PS Form 7405A, Transportation Services Proposal and Contract for Emergency Services. The PS Form 7405A identified a May 17, 2010 contract start date and a November 12, 2010 contract end date, at a $41,000 annual rate. Section 4 stated, in part,
This contract may be terminated by the U.S. Postal Service upon notice of not less than 24 hours, or by the supplier upon notice of not less than 15 days and without the allowance of any indemnity or extra pay in lieu of indemnity to the supplier.(AF 5 at 17; see also Tr. 5-6).
11. Ms. Alston transmitted the PS Form 7405A to Ms. Roedel, who received it on May 17 or 18 (Tr. 12, 28). Appellant did not look at the PS Form 7405A until later in the week (Tr. 12-13).
12. Section b.8 of the PS Form 7405A prepared by Ms. Alston provided that “Terms and Conditions Issue 4, dated February 27, 2009 applies to this contract" (AF 5 at 33). Section C.2.1 of the Terms and Conditions defined contracting officer as,
[T]he person executing this contract on behalf of the Postal Service
. . . [or] the authorized representative of a contracting officer acting within the limits of the authority conferred upon that person. (AF 6 at 86).
13. The prior contractor who had been hospitalized was allowed to resume performance on May 22 (Tr. 12, 47, 79, 81; AF 5 at 44). On May 20, three days after Appellant resigned from her job to perform the postal contract, the Greeley Postmaster informed her that the prior contractor would return. The postmaster advised Ms. Roedel that Respondent intended to terminate Appellant’s contract effective close of business the next day. (Tr. 11, 24, 28, 47, 81).
14. Ms. Roedel was extremely surprised and upset when informed by the postmaster that Respondent intended to terminate her contract on 24-hours’ notice (Tr. 30; AF 2 at 9). Ms. Roedel immediately called Ms. Alston, and spoke with her and Ms. Ledbetter (Tr. 21-22; AF 2 at 9-10). Appellant stated that Ms. Alston had confirmed during their May 14 negotiations that the contract would last for six months even if the prior contractor recovered (Tr. 11, 21). Appellant was told that nothing could be done, and that her only recourse was to appeal (Tr. 11-12; AF 2 at 10).
15. Ms. Alston also instructed Ms. Roedel that she must sign the PS Form 7405A, or she would not be paid by the Postal Service for the week that she performed the contract. Ms. Roedel then did so, on May 22, the same day on which she received the termination notice referenced in Finding 17. (Tr. 20-21, 55, 82; AF 5 at 17).
16. Ms. Roedel had filled out a handwritten cost worksheet attached to PS Form 7405A, which breaks down into various components the $41,000 annualized contract rate agreed between the parties. The cost worksheet identifies “supplier’s wages” of $34,064.50 and “return on investment” of $1,975. (AF 5 at 52). Ms. Alston prepared a typed version of the cost worksheet, making various alterations from that provided by Ms. Roedel, and attached it to the PS Form 7405A (Tr. 64-65; AF 5 at 18). The supplier’s wages line differs by less than one dollar and the return on investment line remains the same, however, between the two versions of the cost worksheet (AF 5 at 18). Ms. Roedel believed that return on investment represented her anticipated profit, aside from the wages that she would have paid herself, which was represented on the supplier’s wages line (Tr. 26).
17. Ms. Ledbetter issued a written final decision of the contracting officer formally terminating Appellant’s contract on 24-hours’ notice effective close of business on May 21, 2010, without any further payment (AF 3). The final decision was sent in the afternoon of May 20 and was received by Ms. Roedel on May 22 (AF 5 at 58; Tr. 28).
18. On June 9, 2010, Ms. Alston prepared a Memorandum for the Record reflecting award of the contract to Appellant. The memorandum stated that Appellant will receive a lump sum of $785.76 "because the original contract was reinstated on May 22.” (AF 5 at 43-44).
19. On June 10, Ms. Ledbetter signed the PS Form 7405A. She testified that her delay from May 22 until June 10 in signing the document was because she was too busy to sign it earlier (AF 5 at 17; Tr. 81). When she signed the PS Form 7405A on June 10, after already having terminated the contract, Ms. Ledbetter believed that she merely was acknowledging that the parties previously had agreed orally to a valid contract (Tr. 86).
20. On a date that is not clear from the record, Respondent paid Appellant $785.76 for seven days of work (AF 5 at 16).
21. Between May 22 until after the originally-scheduled expiration date of the postal contract, Ms. Roedel remained unemployed, causing her considerable financial hardship (Tr. 13). However, Ms. Roedel did not incur additional contract-related out-of-pocket expenses, such as vehicle operating and insurance costs (Tr. 15, 44).
22. On July 12, 2010, Ms. Roedel sent a letter to Ms. Ledbetter appealing the termination decision (AF 2 at 9-10). The resulting appeal was docketed as PSBCA No. 6347. This appeal letter also included a claim in which Appellant asked “to receive the pay for the contract in full.” (AF 2 at 10).
23. The Board designated Appellant’s appeal letter as her Complaint (September 7, 2010 Order). Respondent’s Answer included a motion to dismiss for lack of jurisdiction, asserting that Appellant had not submitted a monetary claim to the contracting officer. The Board then issued an Order requiring Respondent to explain its contention that Appellant’s demand that it pay the contract in full was insufficient to constitute a monetary claim. Rather than do so, Respondent informed the Board that the contracting officer intended to issue a final decision in response to Appellant’s July 12, 2010 letter (November 5, 2010 Order; Respondent’s December 10, 2010 Status Report), obviating the necessity of action in response to its motion to dismiss.
24. On December 13, 2010, Ms. Ledbetter issued a final decision denying the monetary claim included in Appellant’s July 12, 2010 notice of appeal (AF 7), and Appellant timely appealed (AF 8). This appeal was docketed as PSBCA No. 6368, and the cases were consolidated (February 4, 2011 Order).
25. On April 19, 2011, Respondent filed its second dispositive motion, Motion for Summary Judgment, or in the Alternative, to Dismiss, which was denied by the Board on August 1, 2011 (Sharon Roedel, PSBCA Nos. 6347, 6368, 11-2 BCA ¶ 34,808). Thereafter, the Board conducted a hearing, and following post-hearing briefs, closed the record on December 15, 2011.
Positions of the Parties.
The parties agree that they formed an enforceable oral contract on May 14, 2010. This case requires the Board to ascertain the terms of that contract.
Appellant argues that the oral contract included a six-month term that could not be terminated earlier, and that in reliance on the six-month term, she resigned from her employment. She argues that when Respondent terminated the oral contract a week later without a right to do so, it breached the contract entitling her to damages. Appellant requests the remainder of the contract proceeds as those damages.
Respondent argues that the oral contract included a right for it to terminate on 24-hours’ notice without liability. Respondent contends that Appellant corroborated the parties’ agreement of such a termination right when she thereafter signed the PS Form 7405A which included a no-cost termination on notice provision. Therefore, because Respondent terminated the contract on notice, it believes that it owes Appellant nothing further.
Appellant responds to this argument by asserting that she was forced to sign the PS Form 7405A which was inconsistent with the oral contract because Respondent refused to pay her for the work she performed unless she did so. Appellant asserts that she was desperate for money at the time because she had resigned from her job in reliance on the postal contract which she believed would last for the entire six-month term.
Analysis of entitlement.
We have little trouble concluding that the parties entered into an enforceable oral contract on May 14. An oral agreement with the government may be binding on the parties provided that there is a meeting of the minds as to material terms, consideration and authority to bind the government by the official agreeing to the oral contract on behalf of the government. See Howard Nettleton, PSBCA No. 3454, 94-3 BCA ¶ 27,038; see also Tiburzi v. Dept. of Justice, 269 F.3d 1346, 1351 (Fed. Cir. 2001); Singer Co., Librascope Div. v. United States, 568 F.2d 695, 707 (Ct. Cl. 1977). Whether an enforceable contract has been formed by a meeting of the minds depends on analysis of the totality of the factual circumstances. See Texas Instruments Inc. v. United States, 922 F.2d 810, 815 (Fed. Cir. 1990).
We have examined the totality of the factual circumstances and have found that the parties orally agreed to the material terms of a contract without a 24-hour no-cost termination on notice right (Findings 5-7).
As a stark contrast has been presented between the testimony of the two participants in the discussions resulting in the oral contract, further commentary concerning the agreed terms (as to a termination right) is warranted.
At the hearing, Ms. Roedel and Ms. Alston both appeared to be testifying honestly regarding their disparate recollections of the May 14 discussions. However, we find the pre-award questionnaire, contemporaneously prepared by Ms. Alston (AF 6), to be persuasive evidence that the testimony reflecting Ms. Alston’s recollection was faulty. That comprehensive document fails to include any mention of a termination right. To the contrary, it includes language suggesting the absence of such a provision, and it reflects that Ms. Alston expressly advised Appellant that she was expected to perform for the full term. Moreover, the termination provisions that Respondent maintains were agreed upon also included an ability by Appellant to terminate the contract on 15-days’ notice (Finding 10). That ability also is expressly contradicted by the pre-award questionnaire, which reflects a contrasting discussion that the only possibility for Appellant to be released from the contract would be for medical reasons.
Our conclusion that the oral contract agreed upon on May 14, 2010 did not include a termination on notice provision, also is supported by Ms. Roedel’s credible testimony that she would not have resigned from her job of ten years had she believed that the Postal Service could terminate the contract at any time without liability (Finding 9). She specifically asked about that possibility based on her financial security being placed into jeopardy were the agreement to the contrary (Findings 5, 9).
Ms. Roedel’s undisputed immediate reactions and surprise upon learning of the abrupt termination adds further credence to her version of events. During the discussion on the day of termination, Ms. Roedel reminded Ms. Alston about her prior assurances that the contract would last for six months even if the prior contractor recovered, and Ms. Alston did not deny that Ms. Roedel had such a reaction. (Finding 14).
Respondent argues alternatively that if Ms. Alston intended to include a termination on notice right consistent with postal practices but Ms. Roedel understood that no such termination applied, there was no meeting of the minds as to a material term precluding a finding of an enforceable oral contract. While Ms. Alston ordinarily intended to mention a termination on notice right in such circumstances, we have found that the weight of the evidence is that she did not actually do so here. Her subjective unexpressed intention is irrelevant to determine the terms of the contract. See Andersen Consulting v. United States, 959 F.2d 929, 934 (Fed. Cir. 1992). Such a “contention is far too convenient, for it effectively would allow one contracting party to renege on a contract at will based on unexpressed intentions. Such is decidedly not the law . . . “ Applegate v. United States, 52 Fed. Cl. 751, 757 n. 6 (2002).
Based on the foregoing analysis, we conclude that the parties agreed that the contract would last for six months as Appellant posits, and as the pre-award questionnaire corroborates. There is no dispute that consideration existed. As to the authority of Ms. Alston to bind the Postal Service to the oral contract, Respondent appears to have abandoned any argument of lack of authority. In any event, Ms. Alston specifically was delegated authority by Ms. Ledbetter, the contracting officer, to bind Respondent to this agreement (Finding 7). See Hudson Contracting, Inc., ASBCA No. 41023, 94-1 BCA ¶ 26,466; see also H. Landau and Co. v. United States, 886 F.2d 322, 324 (Fed. Cir. 1989).
Respondent places considerable emphasis on Ms. Roedel’s subsequent signature on the PS Form 7405A which included a no-cost termination on notice provision (Findings 10-11, 15) as evidence that the parties had agreed upon such a termination on notice right at the time the oral contract was agreed upon. Where the parties intend to enter an oral contract, it remains enforceable even in the absence of a subsequent written expression of that agreement, see Tiburzi, 269 F.3d at 1352, unless a writing is required by law. See Edwards v. United States, 22 Cl. Ct. 411, 423 (1991). It is undisputed that the parties expected performance to begin immediately based on their May 14 express oral contract and that performance would not be postponed until after a written agreement had been signed (Findings 7-8). Respondent does not argue that a written contract is required by law. This is sufficient to render the oral contract enforceable even if the parties also may have manifested an intention to execute a subsequent written expression of their oral agreement. See Singer Co., 568 F.2d at 707. Indeed, such was the routine policy of the Postal Service in awarding orally these emergency transportation contracts (Finding 7).
Unless adequately explained however, Ms. Roedel’s signature to a document that included a no-cost termination right that she claimed was not part of the oral contract, would tend to corroborate Respondent’s position to the contrary. However, Appellant has explained the situation to our satisfaction.
Respondent does not argue that the PS Form 7405A represents the contract that we are to interpret; rather it agrees that the May 14 oral agreement controls. In any event, we find that Ms. Roedel’s signature on that document is excused by the doctrine of economic duress.
In Systems Technology Associates, Inc. v. United States, 699 F.2d 1383, 1387 (Fed. Cir. 1983), the Federal Circuit explained that economic duress applies where one party involuntarily accepts the terms of another, circumstances permit no reasonable alternative, and those circumstances were the result of the coercive act of the other party. The Federal Circuit emphasized that inducing government conduct must be wrongful in violating notions of fair play. Id., at 1387-88.
Ms. Roedel involuntarily signed the PS Form 7405A. She believed that she had no reasonable alternative to doing so because Ms. Alston told her that she would not be paid if she refused and she was desperate to be paid for the week that she worked for Respondent after she had resigned from her job. This coercive effect resulted from Respondent’s act of insisting that the PS Form 7405A be signed by Ms. Roedel under what amounted to an unfair threat of withholding the pay that Appellant justly was due (Finding 15).
Respondent’s improper threat not to pay Appellant for the work she performed and for which Respondent indisputably owed her payment amounted to improper coercion to force Appellant to sign the PS Form 7405A although it differed from the oral agreement. See George P. Gurdak, PSBCA No. 5049, 05-2 BCA ¶ 33,092. Appellant believed she had no reasonable alternative because of the economic predicament that Respondent had caused (resigning from her job after being assured that the contract would last for six months, then terminating after a week). Id. We conclude that Appellant’s signature on the PS Form 7405A resulted from economic duress. She is not bound by that signature nor is it corroborative of Respondent’s version of events. Accordingly, Appellant’s recovery for Respondent’s breach of contract is unaffected.
Analysis of damages.
When Respondent terminated Appellant’s performance without continuing to pay her, it breached the contract. As the contract does not include (nor does applicable law constructively require) a termination for convenience clause, Appellant is entitled to breach of contract damages. Having ruled on entitlement in favor of Appellant, we next examine those damages.
Appellant seeks the full value of the contract. However, as Respondent notes, her recovery must be reduced by what it would have cost her to have performed had the contract not been breached – lest she receive a windfall recovery. See Bon Aire Construction Co., ASBCA No. 27589, 83-1 BCA ¶ 16,477.
We believe that expectancy damages are appropriate. Such damages are measured by the benefits, including but not limited to profit, that Appellant would have received had Respondent not breached. Three elements are required: that the damages were reasonably foreseeable or actually foreseen by Respondent at the time of contracting; that the damages were caused directly and proximately by Respondent’s breach; and that the damages have been established with reasonable certainty. See Anchor Savings Bank, FSB v. United States, 597 F.3d 1356, 1361 (Fed. Cir. 2010).
We discern and analyze under the Federal Circuit’s standard two elements of such expectancy damages – Appellant’s “return on investment” and “supplier’s wages” she would have earned herself had Respondent not breached. At the time of contracting, Appellant proposed, and Respondent essentially adopted a breakdown of her expected costs of performance, in the form of cost worksheets (Finding 16). To the extent the two versions of those cost worksheets agree and identify proper expectancy damages that would result from a breach, we believe that such damages were actually foreseen by Respondent and were agreed upon by the parties at the time of contracting.
The parties agreed on a “return on investment,” in a $1,975 annualized amount, which we find equates to the profit that the parties actually foresaw Appellant would realize were the contract fully performed. There can be no question that the breach directly resulted in Appellant’s failure to have received that profit. Further, this is the rare case in which it cannot be disputed that lost profits were established with reasonable certainty – the parties themselves, contemporaneously with the contract, agreed in writing upon the amount of Appellant’s anticipated profit. Because the breached contract had a six-month term, half the annualized amount for return on investment equates to $987.50.
However, under the facts of this case, this alone insufficiently compensates Appellant, and expectancy damages are not limited to lost profits. See Fifth Third Bank v. United States, 518 F.3d 1368, 1374 (Fed. Cir. 2008). Both parties also contemplated that Ms. Roedel would perform the contract herself, and therefore receive additional payment for her labors. The parties agreed in their cost worksheets as to the value of her time, identified as supplier’s wages - $34,064.50 annualized, or $17,032.25 for the six-month term of the breached contract (Finding 16). Accordingly, as for return on investment, we view these lost wages as additional lost income which actually was foreseen by Respondent at the time of contracting. This element of expectancy damages also was caused directly and proximately by the breach.
While Ms. Roedel had a duty to mitigate these damages, she resigned from her job and did not find employment for the duration of the contract and so, indeed was damaged in that amount (Finding 21). Accordingly, we calculate Appellant’s gross expectancy damages as $18,019.75 ($987.50 + $17,032.25). However, Appellant performed and was paid for one week of service, representing 1/26 of the contract term. Accordingly, we reduce her recovery by 1/26, yielding $17,326.68 as the recoverable damages.
Respondent criticizes the prospect of such a recovery as representing an award of impermissible consequential damages. However, use of the term consequential damages may represent imprecise shorthand for such damages being too remote and speculative to be recoverable. See Joseph Becks and Associates, Inc., ASBCA No. 31126, 86-3 BCA ¶ 19,299 at 97,583 (“To label the damages ‘consequential’ is not helpful to an analysis of the matter. The term ‘consequential damages’ has been used with confusion in the past and is generally a confusing and unfavored term.”).
Hence, as our appellate authority has advised:
The true concept of consequential damages involves consideration of the type of loss foreseeable by the contracting parties at the time of their agreement. Where such damages are the proximate result of a defendant’s breach of contract, they are recoverable. However, while damages resulting from the ‘natural and probable consequences of the breach complained of [are recoverable,] damages remotely or consequently resulting from the breach are not allowed.’
Olin Jones Sand Co. v. United States, 225 Ct. Cl. 741 (1980), quoting Ramsey v. United States, 101 F. Sup.. 353, 357 (Ct. Cl. 1951)(internal citations omitted). “The real inquiry is as to whether the damages in question are the direct and proximate result of the . . . breach.” Joseph Becks and Associates, 86-3 BCA at 97,583. Here, Appellant had informed Respondent that she was resigning from her job to take on the postal contract (Finding 9), and the losses at issue were unrelated to some collateral contract or undertaking. When Respondent breached, the natural and probable consequences of that breach included Appellant’s loss of income that she would have received under the postal contract. As Appellant did not incur additional out-of pocket costs (Finding 21) however, further recovery is not warranted.
The appeal is sustained in the amount of $17,326.68, plus interest calculated according to the Contract Disputes Act.
Gary E. Shapiro
William A. Campbell
David I. Brochstein